Purpose:
This section provides a full tax exemption on any scholarship granted to meet educational expenses, whether received from the government, a trust, a university, or any other institution.
Key Conditions for Exemption:
✅ Must be a genuine scholarship (not disguised income or salary).
✅ Must be used for education-related expenses (tuition, books, accommodation, etc.).
✅ No monetary limit – the entire scholarship amount is tax-free.
✅ Applies to all students (school, college, research scholars, etc.).
Example 1: University Scholarship
- Student:Priya, an engineering student.
- Scholarship Received:₹50,000 per year from her university for academic excellence.
- Usage:Covers tuition fees and books.
- Scholarship Amount:₹50,000
- Taxable Income:₹0 (Fully exempt under Section 10(16))
Example 2: Government Scholarship for Research
- Student:Rohan, a PhD scholar.
- Scholarship Received:₹1,20,000 per year from UGC (University Grants Commission).
- Usage:Stipend for living expenses and research materials.
- Scholarship Amount:₹1,20,000
- Taxable Income:₹0 (Fully exempt)
Example 3: Private Trust Scholarship
- Student:Ananya, studying medicine.
- Scholarship Received:₹80,000 from a private charitable trust.
- Usage:Pays for hostel fees and medical books.
- Scholarship Amount:₹80,000
- Taxable Income:₹0 (Exempt under Section 10(16))
Non-Qualifying Cases (Taxable Scholarships)
❌ Salary-linked scholarships (e.g., stipend for internship/work).
❌ Scholarships granted in exchange for services (teaching/research assistantships may be taxable).
Example of Taxable Scholarship:
- Student:Arjun, working as a research assistant.
- Stipend Received:₹25,000/month (conditional on research work).
- Tax Treatment:Taxable as “Income from Other Sources” (Not exempt under Section 10(16))
